Twitter Shares Sink to a New Low

Update: Twitter finished New York trading down 8.6% at $38.97, and tipped a bit lower in after-hours trading. It hit a low of $38.72 earlier in the day. The broader market trudged higher, with the Dow Jones Jones Industrial Average closing at a new record.

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Twitter shares sank 12% in morning trading Wednesday to around $37.50, an all-time low for the stock since it began publicly trading in November.

It’s a steep slide from the high of $73.31 on Dec. 26. Twitter has twice reported quarterly results that have shaken Wall Street. Three months ago, Twitter’s stock cratered after its first earnings report as a publicly traded company.

The financials — growing revenue, a move toward profitability and no head-turning misses on analysts’ forecasts — haven’t really been the issue. Instead, investors are worried that Twitter won’t show explosive growth in new sign-ups. Tuesday’s earnings release showed Twitter managed to stem a decline in user growth.

The growth — 14 million new monthly active users — wasn’t impressive enough for investors, who are coming to grips with the fact that Twitter isn’t the next Facebook. Or at least won’t be anytime soon.

As the Journal’s Yoree Koh wrote:

The 10% stock slide in after-hours trading reflects Twitter’s outsize expectations ever since it went public in November and finished the day with a $25 billion market value. Many investors have expected Twitter to eventually follow the trajectory of Facebook Inc., which is used by more than half of the U.S. online population and has built a formidable mobile-advertising business.

While Twitter has proven to be a powerful communications tool for celebrities, activists, marketers and journalists, it hasn’t caught on with mainstream users. Facebook, meanwhile, has become a required place to share photos and life’s daily happenings.

Chief Executive Dick Costolo said on the conference call with analysts (and again on CNBC this morning) that he is quite happy with the number of new users, and how they are engaging with the service. The engagement issue is obscured, Twitter says, by the fact that its new feature enhancements make it less likely users have to “refresh” their Twitter timelines, which would translate into more “views.”

While Twitter has sunk below its opening price from its first day of trading, it still has a ways to go before falling to its IPO price of $26.

(This article was updated to add a more recent chart. An older chart was removed.)